Friday November 12th, 2021

The US$ holds near highs, oil prices weaken, equity markets are mixed while US yields firm ahead of Michigan consumer sentiment report. The dollar index continues to gather strength testing a new 16-month high, up 5.8% ytd as the 10-year US treasury bond yields extend gains. Intraday investors await the University of Michigan’s Consumer Sentiment Index (Nov), Sept JOLTS Job Opening report and Feds Williams speech today for direction to the currency markets. In other news. The BOE may be the first major bank to hike rates, probably in December say Economists polled by Reuters. Oil prices head for a 3rd week of losses. The lack of news over President Biden’s pick for the Federal Reserve Chairman is causing concerns for investors. J&J to split into two public companies. The US warns the EU that Russia could be planning to invade the Ukraine. Covid. The Netherlands starts 3-weeks of partial lockdowns as covid cases soar. AstraZeneca to take profits from covid vaccine sales. England has recorded its longest unbroken run of declining daily covid cases since February. In currency markets. Russian RUB is down 1.4% today impacted by geopolitical concerns and Turkish Lira hits record low vs US$ down 4.2% mtd, down 33.5% ytd. CNY remains under pressure down 0.15%, Asian currencies weaken 0.2% on average vs US$. Trading currencies are mixed with AUD, ZAR & JPY are flat, while NOK & NZD weaken 0.1% and MXN falls 0.35% vs US$.

Oil prices head for their 3rd weekly dip as oil prices drop 2% today as the US$ firms and speculation grow that the US may release oil reserves to ease price pressures. OPEC+ agreed last week to stick to its plans to add 400k bpd to markets each month and trims its oil demand outlook. C$ holds near monthly lows as the combination of a firmer US$ and weaker oil prices put selling pressure on the loonie. Intraday there are no CAD economic data releases so markets will focus on the US data releases for US$ direction. Our bias remains to sell US$ on rallies. Support rises 1.2520, while resistance holds 1.2599, if breached look for 1.2647 next.

Euro remains continued selling pressure as US treasury yields strengthen. The US$ extended its gains to 16-month highs after Wednesday’s US CPI took markets by surprise and spurred a rally in US treasury yields. The fundamental outlook continues to favour the US$ over the Euro after the US inflation report points to an earlier-than-expected policy tightening by the Federal Reserve. Bias remains for Euro to continue to trade weaker potentially towards 1.1320 next week. Support holds at 1.1415 while resistance resets to 1.1500.

EURGBP weakens vs the pound as Brexit optimism returns and on speculation of a BoE rate hike a soon as December. Support holds at .8535 (1.1716) while resistance remains at .8625 (1.1594)

GBP bounces to 1.34 on Brexit & BOE comments. Brexit Minister Frost met his EU counterpart Sefcovic to try and find a NI trade solution, with hopes to de-escalate tensions within the EU. News of a Reuters poll suggesting the BoE may be the first central bank to hike as soon as next month helped the pound bounce from 11-month lows vs US$. Intraday US data releases may put additional pressure on the pound, but the prospect of a BOE hike in December should provide underlying support to the GBP. Support holds at 1.3300, if breached look for 1.3187 (Dec2020) next, while resistance remains at 1.3460.